Germany’s Commerzbank In Talks With Dresdner – Maybe

June 19, 2000

Despite numerous rumors and reports, company spokesmen for both Germany’s Commerzbank and Dresdner Bank denied they were to hold discussions over the weekend aimed at a possible merger. Nevertheless, the banks confirmed today that they had held talks, and would hold more in the future to explore areas in which they could “cooperate.”

The extreme discretion reflects the desire on the part of the management of both banks to avoid a replay of the communications breakdown which aborted the merger between Dresdner and Deutsche Bank (DB) last April, and eventually resulted in the resignation of Bernhard Walter, Dresdner’s CEO.

His replacement Bernd Fahrholz has told shareholders and analysts that Dresdner can go it alone, but pressure from its largest shareholder, Germany’s Allianz AG, to find a partner has continued. Allianz wants to expand its retail distribution network, and see its 21.7 percent interest in Dresdner perform better. Thus closer cooperation, short of a full merger could benefit all parties.

If there is eventually a merger, it would create Germany’s largest bank in terms of assets with around $700 billion and a 7 percent market share, ahead of DB’s 5 percent. Such a consolidation would present less overlap, and Dresdner’s investment banking division, Kleinwort Benson, would significantly strengthen that area for Commerzbank, rather than creating the problem it did with the DB agreement.

A significant problem that will have to be addressed, however, is Commerzbank’s working agreement with Italian insurer Generali, which sells its products through the bank. How this arrangement can be reconciled with Allianz’ sales through Dresdner could pose a serious difficulty.

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